UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934 Date: July 27, 2015 UBS Group AG Commission File Number: 1-36764 UBS AG Commission File Number: 1-15060 (Registrants’ Names) Bahnhofstrasse 45, Zurich, Switzerland (Address of principal executive office) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F ⌧ Form 40-F
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
Date: July 27, 2015
UBS Group AG Commission File Number: 1-36764
UBS AG Commission File Number: 1-15060
(Registrants’ Names)
Bahnhofstrasse 45, Zurich, Switzerland (Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ⌧ Form 40-F
This Form 6-K consists of the presentation materials related to the Second Quarter 2015 Results of UBS Group AG and UBS AG, including speaker notes, which appear immediately following this page.
July 27, 2015
Second quarter 2015 results
1
This report contains statements that constitute “forw
ard-looking statements,” including but not lim
ited to managem
ent’s outlook for UBS’s financial perform
ance and statements relating to the anticipated effect
of transactions and strategic initiatives on UBS’s business and future developm
ent. While these forw
ard-looking statements represent U
BS’s judgments and expectations concerning the m
atters described, anum
ber of risks, uncertainties and other important factors could cause actual developm
ents and results to differ materially from
UBS’s expectations. These factors include, but are not lim
ited to: (i) the degree to w
hich UBS is successful in executing its announced strategic plans, including its cost reduction and efficiency initiatives and its planned further reduction in its Basel III risk-w
eighted assets (RWA) and
levera ge ratio denominator (LR
D), and to m
aintain its stated capital return objective; (ii) developments in the m
arkets in which U
BS operates or to which it is exposed, including m
ovements in securities prices
or liquidity, credit spreads, currency exchange rates and interest rates and the effect of economic conditions and m
arket developments on the financial position or creditw
orthiness of UBS’s clients and
counterparties, and the degree to which U
BS is successful in implem
enting changes to its business to meet changing m
arket, regulatory and other conditions; (iii) changes in the availability of capital andfunding, including any changes in U
BS’s credit spreads and ratings, or arising from requirem
ents for bail-in debt or loss-absorbing capital; (iv) changes in or the implem
entation of financial legislation andregulation in Sw
itzerland, the US, the U
K and other financial centers that may im
pose, or result in, more stringent capital (including leverage ratio), liquidity and funding requirem
ents, incremental tax
requirements, additional levies, lim
itations on permitted activities, constraints on rem
uneration or other measures; (v) uncertainty as to w
hen and to what degree the Sw
iss Financial Market Supervisory
Authority (FINM
A) will approve reductions to the increm
ental RW
A resulting from the supplem
ental operational risk capital analysis mutually agreed to by U
BS and FINM
A, or will approve a lim
ited reduction ofcapital requirem
ents due to measures to reduce resolvability risk; (vi) the degree to w
hich UBS is successful in establishing a U
S intermediate holding com
pany and implem
enting the US enhanced prudential
standards, completing the squeeze-out of m
inority shareholders of UBS AG
, and other changes which U
BS may m
ake in its legal entity structure and operating model, including the possible consequences of
such changes and other similar changes that have been m
ade previously, and the potential need to make further changes to the legal structure or booking m
odel of UBS G
roup in response to legal andregulatory requirem
ents, including capital requirements, resolvability requirem
ents and proposals in Switzerland and other countries for m
andatory structural reform of banks; (vii) changes in U
BS’s competitive
position, including whether differences in regulatory capital and other requirem
ents among the m
ajor financial centers will adversely affect U
BS’s ability to compete in certain lines of business; (viii) changes in
the standards of conduct applicable to our businesses that may result from
new regulation or new
enforcement of existing standards, including m
easures to impose new
or enhanced duties when interacting
with custom
ers or in the execution and handling of customer transactions; (ix) the liability to w
hich UBS m
ay be exposed, or possible constraints or sanctions that regulatory authorities might im
pose on UBS,
due to litigation, contractual claims and regulatory investigations; (x) the effects on U
BS’s cross-border banking business of tax or regulatory developments and of possible changes in U
BS’s policies and practices relating to this business; (xi) U
BS’s ability to retain and attract the employees necessary to generate revenues and to m
anage, support and control its businesses, which m
ay be affected bycom
petitive factors including differences in compensation practices; (xii) changes in accounting or tax standards or policies, and determ
inations or interpretations affecting the recognition of gain or loss, thevaluation of goodw
ill, the recognition of deferred tax assets and other matters; (xiii) lim
itations on the effectiveness of UBS’s internal processes for risk m
anagement, risk control, m
easurement and m
odeling,and of financial m
odels generally; (xiv) whether U
BS will be successful in keeping pace w
ith competitors in updating its technology, in trading businesses; (xv) the occurrence of operational failures, such as
fraud, misconduct, unauthorized trading and system
s failures; (xvi) restrictions to the ability of subsidiaries of the Group to m
ake loans or distributions of any kind, directly or indirectly, to UBS G
roup AG; and
(xvii) the effect that these or other factors or unanticipated events may have on our reputation and the additional consequences that this m
ay have on our business and performance. The sequence in w
hichthe factors above are presented is not indicative of their likelihood of occurrence or the potential m
agnitude of their consequences. Our business and financial perform
ance could be affected by other factorsidentified in our past and future filings and reports, including those filed w
ith the SEC. More detailed inform
ation about those factors is set forth in documents furnished by U
BS and filings made by U
BS with the
SEC, including UBS’s Annual R
eport on Form 20-F for the year ended 31 D
ecember 2014. U
BS is not under any obligation to (and expressly disclaims any obligation to) update or alter its forw
ard-looking statem
ents, whether as a result of new
information, future events, or otherw
ise.
Disclaim
er: This presentation and the information contained herein are provided solely for inform
ation purposes, and are not to be construed as a solicitation of an offer to buy or sell any securities orother financial instrum
ents in Switzerland, the U
nited States or any other jurisdiction. No investm
ent decision relating to securities of or relating to UBS G
roup AG, U
BS AG or their affiliates should be m
ade onthe basis of this docum
ent. Refer to U
BS's second quarter 2015 report and its Annual report on Form 20-F for the year ended 31 D
ecember 2014. N
o representation or warranty is m
ade or implied concerning,
and UBS assum
es no res ponsibility for, the accuracy, completeness, reliability or com
parability of the information contained herein relating to third parties, w
hich is based solely on publicly availableinform
ation. UBS undertakes no obligation to update the inform
Strong balance sheet, funding and liquidity position
Liab
ilities an
d eq
uity
53
113
136
377
Assets
83
314
128
89 67 98
29
Corporate Center —N
on-core and Legacy PortfolioN
on-core and Legacy Portfolio Swiss SRB LRD
down 16%
in the quarter
LRD
reduced by >75%
since 4Q12
CHF billion, Sw
iss SRB LR
D (average, fully applied)
RW
A reduced by >
65% since 4Q
12CH
F billion
Refer to slide 38 for details about adjusted num
bers, Basel III numbers and FX rates in this presentation
1 Refer to page 60 of the 2Q15 report for further detail; 2 Pro-form
a estimate based on period end balance; 3 Estim
ates based on 30.6.15 data, assuming all portfolios are held to
maturity; 3 Pro-form
a estimate excluding any further unw
ind activity; 4 LRD balances can vary m
aterially due to market m
ovements, changes in regulation, changes in m
argin requirem
ents and other factors; 5 2Q15 Sw
iss SRB LRD
(average, fully applied) vs. 31.12.18 estimated Sw
iss SRB LR
D (period-end spot balance, fully applied) excluding any furthe r
unwind activity
Operational risk
Credit and market risk
~70%
of residual LRD
in Rates products
1
CHF billion, Sw
iss SRB LR
D (average, fully applied), 30.6.15
LRD
: natural decay3
,4
CHF billion, Sw
iss SRB (fully applied), period-end spot balances
LRD
CH
F 70 billion
RW
A C
HF 3
2 billion
>40%
of Sw
iss SRB LRD
expected to naturally decay by end-2018
5
9384
70
2Q15
1Q15
4Q14
4Q12
~293
2
31.12.18
~41
31.12.17
~45
31.12.16
~51
31.12.15
~60
14
1920
201216
16
2Q15
32
1Q15
36
4Q14
36
4Q12
103
88
Operational risk
Other
6.3
Muni sw
aps and options2.9
APS/ARS2.7
Securitizations2.5
Credit7.7
Rates48.1
1.6
20.0
0.5
0.8 2.8
0.7
5.1
30
0.3
0.2
WM
A
~0.2
~0.1
WM
~0.6
R&
C
~1. 4
~0.8
~0.3
(~2.5)
(~2.3)
(~1.6)
~0.4
<0.1
~0.7
Interest rate sensitivities 1
Our revenues are positively geared to rising interest rates
Scenario overview and increm
ental NII by business division (+
100 bps parallel increase, scenario B)
3M
8Y
10Y
BC A
+20 bps
+100 bps
+200 bps
1Y
ASteepener
(+20 bps to +
200 bps)
BP
arallel (+100 bps)
CFlatten
er (+200 bps to +
20 bps)
An
nu
al increm
ental
net in
terest incom
e²
OC
I im
pact 3,4
OC
I impact on
reg
ulatory capital 4
Interest rate scenarios: estim
ated impact on N
II, OC
I and regulatory capital CHF billion
Refer to slide 38 for details about adjusted num
bers, Basel III numbers and FX rates in this presentation
1 Forallscenarios,
interestrate
increasesare
assumed
tobe
imm
ediate,equalacross
allcurrencies
andrelative
toim
pliedforw
ardrates
basedon
staticbalance
sheetand
constantFX
rates;2
Theestim
atedim
pactis
forthe
firstyear
ofthe
relevantinterest
ratescenario;
3M
ajorityof
theim
pacton
OCI
would
bethrough
cashflow
hedges,w
hich w
ould not affect regulatory capital; 4 Including estimated O
CI impact related to pension fund assets and liabilities
CHF billion
Other
currencies
USD
31
1Q15
2Q15
Gross results (excluding accounting asym
metry and other adjustm
ents)240
161
Allocations to business divisions
(289)(191)
Net reven
ues
(excluding accounting asymm
etry and other adjustments)
(49)(30)
of which: retained funding costs
(169)(180)
of which: other item
s retained in Group A
LM120
151
Acco
untin
g asym
metry an
d o
ther ad
justm
ents
136 (92)
Mar k-to-m
arket losses from cross currency sw
aps, macro cash flow
hedge ineffectiveness, G
roup Treasury F
X, debt buyback and other
Net treasu
ry inco
me retain
ed in
Co
rpo
rate Cen
ter - Gro
up A
LM
87(121)
Retained funding costW
e continue to expect retained funding costs to decline in the mid term
Treasury income retained in C
orporate Center –
Group A
LMCH
F million
Central funding costs retained in Group Treasury increased quarter on quarter as a result of new
debt issuance
Retained funding costs expected to significantly decrease by end-2016
Credit spreadcom
pression will drive
down costs of the
Group's overall long
term funding together
with declining volum
esas w
e reduce our balance sheet
We w
ill continue to plan in order to m
aintain a diversified funding profile and com
fortableLCR and N
SFR ratios
Refer to slide 38 for details about adjusted num
bers, Basel III numbers and FX rates in this presentation
32
10.3%11.2%
11.1%10.6%
11.8%11.6%
11.4%10.6%
10.4%
1.1%1.1%
1.5%1.7%
1.1%1.4%
1.3%1.2%
2.6%3.9%
2.2%2.7%
1.6%1.4%
2.9%
3.1%
3.1%
IH
GF
ED
CB
A
21.2%
UB
S30.6.15
14.4%
1.2%
5.6%
Capital strength is the foundation of our successW
e have the highest Basel III fully applied CET1 capital ratio among large global
banksB
aselIIIfu
llyapplied
capital–large
globalbanks
Based on latest available disclosureSw
iss SRB
Basel III fu
lly applied capital30.6.15
European
1U
S2
14.4
%
21.2
%
0.4%
13.5%
Comm
on equity tier 1 capitalH
igh-trigger loss absorbing capitalLow
-tri gger loss absorbing capitalAdditional Tier 1 capitalTier 2 capital
Comm
on equity tier 1 capital
Refer to slide 38 for details about adjusted num
bers, Basel III numbers and FX rates in this presentation
1Basel III CET1 capital ratios (fully applied) as per CR
D IV; 2 Basel III fully applied CET1 capital ratios under advanced approach
0.5%
33
(<0.1)7.1
(<0.1)7.2
(0.1)
7.5
0.5(0.1)
7.9
7.5
(<0.1)
(0.1)
(0.3)
7.9
0.20.2
0.4
0.5
(0.3)
0.6(<0.1)
0.9
0.7
0.2
(0.2)
2.4
1.1
1.3
1.1
Temporary
regulatory demand
3
Litigationprovisions
2Services &G
roup ALM
CHF 1.0 billion
net cost reduction tar get by 2015 year-end exit ratevs. FY13
1
~CH
F 0.9 billion net cost reduction as per June 2015 exit rate vs. FY13
Non-core
and Le gacy P
ortfolio
CHF 0.4 billion
net cost reduction tar get by 2015 year-end exit ratevs. FY13
1
Residual
operating expenses
Net cost
reductionFX
Net cost
reductionFX
Net cost
reductionFX
FY1
3FY
14
March
20
15
ann
ualized
exit rate
Jun
e 20
15an
nu
alizedexit rate
4
Services an
dG
roup A
LM
June 2015 exit ratenet cost reduction
Average monthly
run rate (residual operating expenses)
~CH
F 630 m
illion~
CHF 620
million
~CH
F 600 m
illion~
CHF 590
million
~CH
F 90m
illion~
CHF 80
million
~CH
F 50m
illion~
CHF 50
million
FY1
3FY
14
March
20
15
ann
ualized
exit rate
Jun
e 20
15an
nu
alizedexit rate
Non
-core and
Legacy Portfolio
June 2015 exit ratenet cost reduction
Net cost
reductionN
et costreduction
Net cost
(reduction)/increase
Litigationprovisions
Residual
operating expenses
Average monthly
run rate (residual operating expenses)
~C
HF 0.9
billion annualized
net costredu
ction
+
Lower allocations
from Corporate
Center –Services
Lower direct costs
in Non-core and Legacy Portfolio
Normalization,
incl. seasonality
Adjusted operating expenses before allocations (net of allocations to Non-core and Legacy Portfolio), CH
F billion
Adjusted operating expenses, CHF billion
Normalization,
incl. seasonality
Normalization,
incl. seasonality
Corporate Center cost reductions
Adjusted numbers unless otherw
ise indicated, refer to slide 38 for details about adjusted numbers, Basel III num
bers and FX rates in this presentationCharts illustrative only and bars not to scale; 1 R
efer to page 41 of the 2014 annual report for details on our cost reduction targets; 2 Provisions for litigation, regulatory andsim
ilar matters; 3 Regulatory dem
and of temporary nature; 4 Increm
ental Group Technology investm
ent of ~CH
F 0.1 billion has been self-funded by business divisions via direct cost savings and excluded from
Corporate Center – Services
34
Services and Group ALM
Net cost reduction
CHF 1.0 billion by 2015 year-end exit rate
Non-core and
Le gacy PortfolioN
et cost reduction
Basel III RWA (fully applied)
CHF 0.4 billion by 2015 year-end exit rate, additional CH
F 0.7 billion after 2015
~CH
F 40 billion by 31.12.15, ~CH
F 25 billion by 31.12.17
Business divisions
Corporate C
enter
Retail & Corporate
Net new
business volume grow
th rateN
et interest margin
Adjusted cost/income ratio
1-4% (retail business)
140-180 bps50-60%
Global Asset
Managem
ent
Net new
money grow
th rateAdjusted cost/incom
e ratioAdjusted annual pre-tax profit
3-5% excluding m
oney market flow
s60-70%CH
F 1 billion in the medium
term
Investment Bank
Adjusted annual pre-tax RoAE
Adjusted cost/income ratio
Basel III RWA lim
it (fully applied)Funded assets lim
it
>15%
70-80%CH
F 70 billionCH
F 200 billion
Refer to slide 38 for details about adjusted num
bers, Basel III numbers and FX rates in this presentation
1 Refer to page 41 of the 2014 annual report for details; 2 Our objective is to m
aintain a post-stress fully applied CET1 capital ratio of at least 10%; 3 Based on the rules applicable
as of the announcement of the target (6.5.14)
Wealth M
anagement
Americas
Net new
money grow
th rateAdjusted cost/incom
e ratio2-4%75-85%
Wealth M
anagement
Net new
money grow
th rateAdjusted cost/incom
e ratio3-5%55-65%
10-15% annual adjusted pre-tax profit grow
th for com
bined businesses through the cycle
Group
Group
Adjusted cost/income ratio
Adjusted return on tangible equityBasel III CET1 ratio (fully applied)Basel III RW
A (fully applied)Sw
iss SRB LR
D
60-70%around 10%
in 2015, >15%
from2016
at least 13%2
<CH
F 215 billion by 31.12.15, <CH
F 200 billion by 31.12.17CH
F 900 billion by 20163
Ranges for sustainable performance over the cycle
Group and business division targets
1
35
Adjusted numbers unless otherw
ise indicated, refer to slide 38 for details about adjusted numbers, Basel III num
bers and FX rates in this presentation
CC adjusted operating expenses before service allocations
CC
-Services ad
justed
op
erating
expen
ses befo
re service allo
cations to
busin
ess divisio
ns an
d C
orp
orate C
enter u
nits
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
CH
F m
illion
Personnel expenses
1,063977
917980
934879
850975
888881
General and adm
inistrative expense906
8451,020
966945
7981,010
1,128920
958
Depreciation and im
pairment of property and equipm
ent161
180170
185179
184178
197196
196
Am
ortization and impairm
ent of intangible assets1
11
11
12
25
5
Total ad
justed
operatin
g exp
enses b
efore service allo
cation
sto
busin
ess divisio
ns an
d C
orp
orate C
enter u
nits
2,1312,003
2,1072,132
2,0601,863
2,0392,303
2,0092,040
Services (to)/from
business divsions and CC
units(1,898)
(1,895)(1,837)
(1,933)(1,828)
(1,872)(1,859)
(2,048)(1,791)
(1,827)
of which: S
ervices from business divisions
611
82
66
1312
108
of which: W
ealth Managem
ent(500)
(485)(462)
(523)(463)
(503)(493)
(543)(469)
(478)
of which: W
ealth Managem
ent Am
ericas(273)
(266)(263)
(267)(249)
(262)(263)
(295)(265)
(270)
of which: R
etail & C
orporate(316)
(306)(305)
(319)(274)
(282)(271)
(310)(277)
(276)
of which: G
lobal Asset M
anagement
(127)(122)
(126)(122)
(112)(113)
(115)(128)
(105)(115)
of which: Investm
ent Ban k
(548)(561)
(558)(572)
(619)(609)
(612)(665)
(601)(604)
ofw
hich:C
C-
Group
ALM
(118)(142)
(111)(110)
(98)(89)
(98)(99)
(69)(74)
ofw
hich:C
C-
Non-core
andLegacy
Portfolio
(22)(22)
(21)(21)
(20)(20)
(20)(21)
(14)(19)
Total ad
justed
operatin
g exp
enses
233108
27019 9
233(9)
180255
218212
36
Adjusted numbers unless otherw
ise indicated, refer to slide 38 for details about adjusted numbers, Basel III num
bers and FX rates in this presentation1
Refer to the "R
e gional performance" section of the 2Q
15 financial report for further detail; 2 Europe, Middle East and Africa excluding Sw
itzerland;3 Refers to item
s mana ged globally
Regional performance –
2Q15
1
CH
F billion
1Q15
2Q15
1Q15
2Q15
1Q15
2Q15
1Q15
2Q15
1Q15
2Q15
1Q15
2Q15
WM
0.10.1
0.60.6
1.00.9
0.40.4
-0.0
2.12.0
WM
A1.8
1.8-
--
--
--
-1.8
1.8
R&
C-
--
--
-1.0
1.0-
-1.0
1.0
Global A
M0.2
0.20.1
0.10.1
0.10.1
0.1-
-0.5
0.5
Investment B
an k0.8
0.70.7
0.80.8
0.70.4
0.2(0.0)
(0.0)2.7
2.3
Corporate C
enter-
--
--
--
-0.0
(0.1)0.0
(0.1)
Grou
p2.9
2.81.4
1.51.9
1.71.9
1.70.0
(0.2)8.1
7.5
WM
0.10.1
0.30.3
0.60.6
0.20.2
0.00.0
1.21.3
WM
A1.5
1.6-
--
--
--
-1.5
1.6
R&
C-
--
--
-0.5
0.5-
-0.5
0.5
Global A
M0.1
0.10.0
0.10.1
0.10.1
0.1(0.0)
(0.0)0.3
0.3
Investment B
ank0.6
0.50.5
0.50.6
0.50.2
0.20.0
0.11.8
1.7
Corporate C
enter-
--
--
--
-0.4
0.40.4
0.4
Grou
p2.3
2.40.9
0.81.3
1.21.0
1.00.4
0.55.8
5.9
WM
0.00.0
0.20.2
0.40.3
0.20.2
(0.0)(0.0)
0.90.8
WM
A0.3
0.2-
--
--
--
-0.3
0.2
R&
C-
--
--
-0.4
0.4-
-0.4
0.4
Global A
M0.1
0.00.0
0.00.0
0.00.1
0.10.0
0.00.2
0.1
Investment B
ank0.2
0.10.3
0.40.2
0.10.2
0.1(0.0)
(0.1)0.8
0.6
Corporate C
enter-
--
--
--
-(0.3)
(0.5)(0.3)
(0.5)
Grou
p0.6
0.40.5
0.60.6
0.50.9
0.7(0.4)
(0.6)2.3
1.6
Global³
Total
Operatin
g
inco
me
Operatin
g
expen
ses
Pro
fit befo
re tax
Am
ericasA
sia Pacific
EMEA
²Sw
itzerland
37
Adjusted numbers unless otherw
ise indicated, refer to slide 38 for details about adjusted numbers, Basel III num
bers and FX rates in this presentationRefer to page 14 of the 2Q
15 financial report for an overview of adjusted num
bers; 1 Non-core and Legacy Portfolio
Adjusted resultsA
djusting items
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
CHF m
illion
Op
erating in
com
e as reported
(Gro
up
)7,775
7,389 6,261
6,307 7,258
7,147 6,876
6,746 8,841
7,818
Of w
hich:
Gain on sale of a subsidiary
Wealth M
anagement
141 G
ain on sale of the Belgian dom
estic WM
businessW
ealth Managem
ent56
Gain on sale of G
lobal AM
's Canadian dom
estic businessG
lobal Asset M
anagement
34 G
ain from the partial sales of our investm
ent in Markit
Investment B
ank43
11 Im
pairment of financial investm
ents available-for-saleInvestm
ent Bank
(48)Investm
ent Bank
55 C
orporate Center -
Group A
LM(24)
Ow
n credit on financial liabilities designated at FV
Corporate C
enter -G
roup ALM
(181)138
(147)(94)
88 72
61 70
226 259
Gains on sales of real estate
Corporate C
enter -S
ervices19
207 61
23 1
20 378
Corporate C
enter -G
roup ALM
(119)(75)
Corporate C
enter -N
CL
127
Op
erating in
com
e adju
sted (G
rou
p)
7,983 7,232
6,201 6,415
7,147 7,031
6,863 6,656
8,096 7,492
Op
erating exp
enses as rep
orted
(Grou
p)
6,327 6,369
5,906 5,858
5,865 5,929
7,430 6,342
6,134 6,059
Of w
hich:
Wealth M
anagement
26 50
62 41
40 38
60 48
46 69
Wealth M
anagement A
mericas
10 10
13 26
10 7
15 23
24 24
Retail &
Corporate
15 13
15 12
15 13
20 16
16 17
Global A
sset Managem
ent4
14 12
13 4
2 5
39 18
4 Investm
ent Bank
6 31
84 89
124 27
50 60
70 66
Corporate C
enter -S
ervices(3)
5(1)
(7)2
4 16
8 119
0C
orporate Center -
NC
L1
188 18
5 24
9(2)
10 14
11 13
Wealth M
anagement A
mericas
(3)(7)
Global A
sset Managem
ent(8)
Investment B
ank(19)
(1)C
orporate Center -
NC
L1
(3)Im
pairment of an intangible asset
Investment B
ank11
Op
erating exp
enses ad
justed
(Gro
up
)6,081
6,229 5,718
5,660 5,661
5,840 7,287
6,142 5,829
5,857
Op
erating p
rofit/(lo
ss) befo
re tax as reported
1,447 1,020
356 449
1,393 1,218
(554)404
2,708 1,759
Op
erating p
rofit/(lo
ss) befo
re tax adju
sted1,901
1,003 484
755 1,486
1,191 (424)
514 2,268
1,635
Net losses related to the buyback of debt
in public tender offer
Net restructuring charges
Credit related to changes to retiree benefit plans
in the US
Net gain on sale of rem
aining proprietary trading business
38
Use of adjusted num
bersU
nless otherwise indicated, “adjusted” figures exclude the adjustm
ent items listed on the previous slide, to the extent applicable, on a G
roup and business division level. Adjusted results are a non-G
AAP financial measure as defined by SEC regulations. Refer to page 14 of the 2Q
15 financial report for an overview of adjusted num
bers.
If applicable for a given adjusted KPI (i.e., adjusted return on tangible equity), adjustment item
s are calculated on an after-tax basis by applying indicative tax rates (i.e., 2% for ow
n credit, 22%
for other items, and w
ith certain large items assessed on a case-by-case basis). R
efer to page 24 of the 2Q15 financial report for m
ore information.
Basel III R
WA
, Basel III capital an
d Basel III liquidity ratios
Basel III numbers are based on the BIS Basel III fram
ework, as applicable for Sw
iss Systemically relevant banks (SRB). N
umbers in the presentation are Sw
iss SRB Basel III numbers
unless otherwise stated. O
ur fully applied and phase-in Swiss SR
B Basel III and BIS Basel III capital components have the sam
e basis of calculation, except for differences disclosed on page 96 of the 2Q
15 financial report.
Basel III risk-wei ghted assets in this presentation are calculated on the basis of Basel III fully applied unless otherw
ise stated. Our RW
A under BIS Basel III are the same as under
Swiss SRB Basel III.
Leverage ratio and leverage ratio denominator in this presentation are calculated on the basis of fully applied Sw
iss SRB, unless otherw
ise stated.
Refer to the “Capital M
anagement” section in the 2Q
15 financial report for more inform
ation.
Cu
rrency tran
slationM
onthly income statem
ent items of foreign operations w
ith a functional currency other than Swiss francs are translated w
ith month-end rates into Sw
iss francs. Refer to “N
ote 19Currency translation rates” in the 2Q
15 financial report for more inform
ation.
Rounding
Num
bers presented throughout this presentation may not add up precisely to the totals provided in the tables and text. Percentages, percent changes and absolute variances are
calculated based on rounded figures displayed in the tables and text and may not precisely reflect the percentages, percent changes and absolute variances that w
ould be derived basedon figures that are not rounded.
Important inform
ation related to this presentation
UBS Second Quarter 2015 Earnings Call Remarks July 27, 2015
Sergio P. Ermotti (Group CEO): Opening remarks
SLIDE 2 – 2Q15 highlights
As you are aware, macroeconomic uncertainty and market turbulence increased client risk aversion in the second quarter, reducing overall activity levels. Despite this, we delivered adjusted pre-tax profit of 1.6 billion francs and net profit of 1.2 billion. This takes our first half net profit to almost CHF 3.2 billion francs, up over 70% on the same period last year and our return on tangible equity was 12%.
Every business in every region delivered a solid performance, demonstrating the resilience and diversification of our earnings and the strength of our business model.
Our Basel 3 fully applied CET1 ratio rose to 14.4%, and our fully applied Swiss SRB leverage ratio increased to 4.7%, the latter partly reflecting a substantial reduction in the leverage ratio denominator for the Non-Core and Legacy Portfolio.
Retail and Corporate reported its best second quarter since 2010, with pre-tax profits of 414 million francs. Net new business volume of 3.1% for retail clients was particularly strong for a second quarter, and the business again met all of its targets.
Our universal bank in Switzerland is a key pillar in our strategic value proposition so we’re very pleased that Euromoney recently named UBS the “Best Bank in Switzerland” for the fourth consecutive year, so congratulations to the team on their continued excellent performance.
Global Asset Management delivered pre-tax profit of 134 million, as challenging market conditions for alternatives resulted in lower performance fees. Net new money was once again very strong, with net inflows balanced between Wealth Management and third-party clients.
The Investment Bank’s results were solid, with 617 million in pre-tax profit, as our equities franchise had its best second quarter since we accelerated our strategy in 2012. Adjusted results in our FX and rates business improved year on year on higher volumes. The IB delivered an adjusted return on attributed equity of 34%. Pre-tax profit in the first six months rose by over 30% year-on-year, while the IB operated comfortably within its risk and resource limits and continued to provide excellent service to its clients.
Recently, the IB was named Best Equity House in Western Europe and Best Flow House in North America underscoring the success of our client-centric business model.
SLIDE 3 – The world’s leading wealth management franchise
UBS is the world’s only truly global wealth manager, with a strong presence in both the largest and fastest growing markets.
Wealth Management had its best second quarter since 2009, with 769 million francs of very high-quality pre-tax profit. Recurring income increased, reflecting continued success in our strategic initiatives to grow loans, increase mandate penetration, and improve pricing. Adjusted net new money was robust at 8.4 billion. Wealth Management Americas delivered record total operating income and recurring net fee income, and saw gross lending rise by 4% compared with the prior quarter. The pre-tax profit of 231 million dollars, however, was affected by various increased provisions.
This business, with the most productive advisors in the industry, in the largest market in the world, and as part of the leading wealth management franchise globally, is critical to our strategy and to our growth prospects. Let me also remind you that almost every dollar we earn in pre-tax profit across our businesses in the US is available to distribute to shareholders, as we continue to utilize deferred tax assets. So it’s not hard to see why this strong business, with its strategic and financial importance, looks attractive to our competitors, but it’s worth even more to UBS and its shareholders and that’s why it’s not for sale.
Now looking at our wealth management businesses combined, together they posted strong results for the first half, with pre-tax profits of 2.1 billion francs, up 14% annually since 2012.
We were pleased that UBS regained the title of “Best Global Wealth Manager” in the 2015 Euromoney Awards for Excellence, and we were
ranked as the largest global wealth manager, according to the annual Scorpio benchmark. Importantly, we were also the fastest growing large-scale wealth manager and the most diversified.
Slide 4 - Implementing our target capital structure
Establishing UBS Switzerland AG was another critical milestone in improving the Group’s resolvability and we are the first bank to complete this step in Switzerland. In terms of implementing our overall recovery and resolution plan, having also implemented a revised business and operating model for UBS Limited, as far as UBS is concerned we are closer to 100% complete than to 50.
I’d also like to mention two important steps in this process. One is the establishment of an Intermediate Holding Company in the US, where we are well on our way and expect to complete the process in July of 2016.
The second will take place in Q3 of this year, when we establish a Group service company, as a subsidiary of UBS Group AG. We will then transfer more of our shared service and support functions into entities beneath it.
Slide 5 – UBS’s strategic priorities
Looking ahead, I want to reiterate our priorities.
First, is to capitalize and build upon our early-mover advantage.
It’s almost four years since we adapted our strategy to succeed in the new environment. We’re ahead of our capital requirements and are first movers in the management of regulatory change. We have also built a clear execution track record, and now we need to press home all of these advantages.
We are also firmly focused on improving effectiveness and efficiency. This is about creating the right cost structure for a 21st century bank, to enable long-term growth in the evolving macroeconomic and regulatory environment. So, we remain fully committed to our cost reduction target of 2.1 billion francs and we continued to make good progress in the second quarter.
Improving effectiveness is also critical, and as we simplify our IT infrastructure and re-engineer internal processes we have a unique opportunity to achieve much greater front-to-back integration. We’re also continuing to invest heavily in compliance and risk control.
As our competitors regroup and focus on rebuilding capital, we see an environment where costs will become a key battleground. For this reason, we need to focus on our strategic efforts with the same intensity and consolidate our position as a well-capitalized, efficient organization and growing organization.
That’s why our third priority is investment for long term growth and to support sustainable returns to our shareholders. These are in technology and digitalization and in certain regions – such as the Americas and particularly Asia. We’re also continuing to invest in attracting the right people to the bank, from apprentices to senior executives, and we’re developing the talent we have, to achieve their full potential and to better serve our clients.
On the technology front, we have been an early mover in a number of areas, and we will continue to build on this. Our Neo platform in the IB, our wealth management advisory app and e- and mobile banking services in Retail & Corporate have won broad industry recognition, but more importantly they are used extensively by our clients. These kinds of
investment are not just about defending our position, but they have allowed us to capture share and drive business efficiently into the bank. Of the CHF 3 billion we are spending to restructure the bank up to 2017, over 50% represents investments in technology.
Today, UBS enjoys a unique period of strategic clarity with the capital and execution track record to back it up, and this gives me great confidence in our future.
Specifically, this means that despite expectations for higher future capital requirements and macro-economic uncertainty, our dividend policy is unchanged. We intend to pay out at least 50% of net profit subject to UBS maintaining a fully applied Basel III CET1 capital ratio of at least 13% and at least 10% post-stress. In addition, in the third quarter, we expect to pay the supplementary capital return of CHF 0.25 per share, associated with the share for share exchange.
As challenging market conditions continue, and as you have heard me say before, we will stay close to our clients and provide them with the advice and execution they need, while also delivering against the priorities and targets we have committed to.
Thank you. Tom will now take you through the details of the quarter.
Tom Naratil (Group CFO and Group COO)
SLIDE 6 – UBS Group AG results (consolidated)
As usual, my commentary will reference adjusted results unless otherwise stated.
This quarter, we excluded net restructuring charges of 191 million Swiss francs, an own credit gain of 259 million, a gain of 56 million on the sale of the Belgian domestic Wealth Management business, a gain of 11 million from a further partial sale of our investment in Markit, and an impairment of 11 million of an intangible asset.
Profit before tax was 1.6 billion, up 37% year-on-year, and down 28% from a very strong first quarter.
Net profit attributable to shareholders was 1.2 billion, after a tax expense of 443 million and net profit attributable to non-controlling interests of 106 million.
As we’ve said in the past, you shouldn’t multiply any quarterly results by four. The same is true for the first half of the year, which you shouldn’t multiply by two, as the third quarter is seasonally slower.
We’d also like to highlight a number of financial reporting and accounting changes that occurred in the quarter, as well as others expected in the future.
Consistent with changes in the manner in which operating segment performance is assessed, beginning in the second quarter of 2015, we now apply fair value accounting for certain internal funding transactions between Corporate Center – Group ALM and the Investment Bank and Corporate Center – Non-core and Legacy Portfolio, rather than applying amortized cost accounting. This treatment better aligns with the mark-to-market basis on which these internal transactions are risk managed within the Investment Bank and Corporate Center – Non-core and Legacy Portfolio. The terms of the funding transactions remain otherwise unchanged. In connection with these changes, own credit gains and losses are now reported in Corporate Center - Group ALM, as opposed to Corporate Center – Services. Prior periods have been restated to reflect these changes. In addition, we expect to early adopt the own credit presentation requirements of IFRS 9 in the first quarter of 2016, where changes in the fair value of liabilities related to own credit will be recognized in other comprehensive income rather than through P&L.
Further details on these and other changes, can be found in note one of our quarterly report which we’ll publish tomorrow.
SLIDE 7 – Wealth Management
Wealth Management delivered another strong performance, with profit before tax of 769 million, its best second quarter since 2009.
Recurring revenues increased in all regions, with increases in both net interest income and recurring net fee income. Net interest income increased 1% to 568 million on higher product revenues from loans and deposits. Recurring net fee income increased by 3% to nearly a billion, as we continued to increase mandate penetration, grow loan balances, and benefit from ongoing pricing measures.
Transaction-based income declined following a very strong first quarter, partly as a consequence of the Swiss National Bank’s actions in January.
Expenses were broadly unchanged at 1.3 billion, while our cost/income ratio was 62%, within our target range of 55 to 65%.
For the first half of the year, Wealth Management’s profit before tax rose by over 570 million compared to the first half of last year, and by 221 million excluding charges for litigation, regulatory and similar matters. This reflected strong growth in revenues, which rose by 268 million, and good cost control, with costs increasing marginally on an underlying basis. These results demonstrate not only the high-quality growth we’re capturing, but also continued benefits from efficiency measures within Wealth Management, and the cost savings delivered by the Corporate Center.
SLIDE 8 – WM balance sheet and capital optimization program
As announced on the fourth quarter results call, we’ve acted on a number of fronts to optimize resource utilization, and to ensure that our products and services are appropriately priced relative to the resources they consume. Last quarter, we said we’d be executing a balance sheet and capital optimization program in Wealth Management in the first half, with assets in scope of around 30 billion. The program was focused on clients with high balance sheet usage. We’ve discussed a variety of options with affected clients, which include cash alternatives, investment products, extension of maturity on deposits, or re-pricing.
With a majority of the program complete, we can confirm it’s been a success. We’ve had lower outflows than expected, and the program has had clear benefits. Of the client assets shifted into investment products, the largest shifts were into mandates, which increased by more than one billion from the program. We’ve already reduced both LRD and LCR outflow assumptions by 7 billion. In the third quarter, we expect an additional LRD reduction of around 3 billion and a further LCR outflow assumption reduction of around 2 billion. In terms of profitability, the clients who withdrew all or part of their balances with us, in aggregate were not economically profitable, however economic profit on retained relationships has significantly improved.
We believe that the program is not only accretive to economic profit, but to total profit as well.
SLIDE 9 – Wealth Management
Net new money was 8.4 billion adjusted for the outflows associated with the balance sheet and capital optimization program, with only 1.1 billion contributed from Lombard lending. Our net new money growth rate was 3.5%, within our target range of 3 to 5%.
Mandate penetration increased 80 basis points to 26.3% of invested assets, as the business added 9.2 billion in net new mandates, bringing our total mandates to nearly a quarter of a trillion.
Over the past year, we’ve seen signs that our clients’ risk appetite has picked-up slightly. For previously existing mandates, the most common shift we’ve seen year-to-date is a one-notch step-up in risk.
Net margin was up year-on-year for the fourth consecutive quarter, and month-to-month swings in our gross margin were limited.
SLIDE 10 – Wealth Management
Adjusted net new money was positive in all regions, and was particularly strong in APAC and Switzerland, with significant contribution from ultra-high net worth clients where we saw inflows of 7.1 billion. Emerging Markets adjusted net new money was positive, but continued to be impacted by geopolitical and economic challenges.
Operating income decreased across the regions, on lower transaction-based income, mainly due to lower revenues from portfolio rebalancing and more limited FX volumes. Revenues were down across all products, with the exception of cash equitites, which increased due to strength in APAC.
SLIDE 11 – Wealth Management APAC
APAC’s performance in the quarter was extremely strong, and first half profit before tax is up nearly 60% year-over-year to around 450 million. That’s nearly 75% of the full-year profit before tax the business delivered in 2014. Profit before tax has grown at a compound annualized growth rate of 65% since the first half of 2012. We’re the largest wealth manager in the region and we’re outgrowing the market in ultra-high net worth. Over the last three years, total invested assets have grown over 50%, adding nearly 100 billion to our asset base.
Our platform provides access to a full suite of CIO products, as well as innovative solutions from our leading Investment Bank and Global Asset Management businesses. Our global capabilities and insights benefit our sophisticated clients as they increasingly look to diversify their wealth. Our brand is highly valued and desired in the region, especially by the clients that we target. We’re honored that a majority of APAC billionaires bank with us, seeing us as a valued partner in helping them achieve their aspirations. Our success is built on multi-generational relationships which we’ve developed in over 50 years of unbroken commitment to the region.
SLIDE 12 – Wealth Management Americas
Wealth Management Americas delivered record operating income of 1.9 billion dollars. Increased recurring income was driven both by record net interest income, which rose 9%, and record recurring net fee income, which increased 3% on continued growth in managed account fees. These increases more than offset lower transaction based income, which fell 2% on lower client activity.
Profit before tax was 231 million, and was impacted by a 71 million increase in charges for provisions for litigation, regulatory and other matters, as well as a 21 million increase in legal fees. Our underlying profit before tax excluding provision charges was 318 million, and we’re pleased with the continued growth in top line performance.
SLIDE 13 – Wealth Management Americas
Net new money was a solid 3.2 billion excluding outflows from record seasonal tax payments, with strong inflows from advisors who’ve been with the firm for more than one year. Reported net new money was negative 700 million, including an estimated 3.9 billion of outflows related to seasonal tax payments.
Invested assets were down 5 billion dollars, with the decrease mostly due to market performance.
Gross margin increased 1 basis point to 74 basis points on our record operating income, and net margin decreased 2 basis points to 9 basis points on higher operating expenses.
SLIDE 14 – Wealth Management Americas
FA productivity remained industry-leading, as annualized revenue per FA rose to a new record of over 1.1 million dollars.
Consistent with our strategy, we continued to grow lending balances with total loans growing 4% to 47.3 billion dollars. Average mortgage balances increased 3% to 8 billion dollars and securities-backed lending balances were up 3% to 29 billion. Our focus on banking and lending is a key pillar of growth for future profitability, and we’re well positioned for any future Fed moves this year.
SLIDE 15 – Retail & Corporate
Retail and Corporate delivered another strong quarter with all KPIs within their target ranges. Profit before tax was 414 million francs, the highest it’s been in a second quarter since 2010.
Operating income was 952 million, down 3% on lower transaction-based income and net interest income.
Following elevated client activity and gains from macro fair value hedge ineffectiveness in the prior quarter, transaction-based income decreased.
Net interest income declined 1%, on lower income from the investment of the Group’s equity. Net interest margin decreased by 1 basis point to 164 basis points.
Net credit loss expenses decreased to 4 million from 21 million, as credit losses for new cases were stable, and releases and recoveries increased. The stronger Swiss franc is expected to have a negative effect on the Swiss economy, as seen in economic data for the first quarter of 2015. To date, we’ve seen limited effects of the stronger Swiss franc on small and medium-sized enterprises, which we attribute, in part, to existing order books. However, with the average order period of three months now
passed, we would expect to see a deterioration in the results of these enterprises over the next 12 months, particularly for export-oriented entities. The tourism sector has been largely protected during the 2014-15 winter season due to pre-existing bookings, and we therefore anticipate seeing a fuller impact on the industry through extended hotel closure in the off-peak season and into the 2015-16 winter season.
To date, we’ve seen a limited decline in credit quality. However, we expect that any negative effect on the Swiss economy will impact some of the counterparties within our domestic lending portfolio, and lead to an increase in credit loss expenses in future periods from the low levels observed in the past two quarters. As we said previously, for 2015, we expect more normalized and slightly increased credit loss expense levels compared with 2014.
We actively manage our portfolio, and we’ve performed detailed reviews, on a client-by-client basis. We continue to closely watch the broader portfolio for signs of deterioration, and don’t see credit losses exceeding expected levels for the portfolio.
Operating expenses were broadly unchanged at 538 million.
Net new business volume growth for our retail business remained solid at 3.1%, as strong net new client assets more than offset slightly negative net new loans.
We continue to invest in e- and mobile banking technologies. During the second quarter, we successfully launched the UBS Paymit app in Switzerland, which allows users to send and request money through their smartphones – quickly, securely and conveniently. The app has had over 70 thousand downloads, and has received an average four and a half star rating on the Apple App Store.
Our clients who utilize e- and mobile continue to show higher income per client account, return on business volume and higher net new business volume per client account.
SLIDE 16 – Global Asset Management
In Global Asset Management, operating income decreased 7% in challenging conditions for alternative managers. Performance fees decreased to 20 million, as late quarter performance in the alternatives industry was subdued, including for O’Connor and A&Q.
Net management fees increased mainly in traditional investments and global real estate, driven by capital increases in listed funds as well as new commitments into an infrastructure and private equity product. Expenses were 342 million, up 5% on higher personnel expenses and higher technology charges from Corporate Center - Services.
Net new money excluding money markets continued to be very strong, with 8.3 billion in net inflows, was positive across all capabilities, and well balanced between our wealth management businesses and third parties.
SLIDE 17 – Investment Bank
The Investment Bank delivered another strong quarter with profit before tax of 617 million. Performance was very good in APAC, where the business delivered double-digit growth both in the quarter and year-on-year.
Investor Client Services revenues were solid at 1.5 billion, with a strong performance from Equities. Revenues were up 22% year-on-year with increases in both Equities, and FX, Rates and Credit.
Equities revenues were strong, increasing 30% year-on-year to 1.1 billion, the highest second quarter since the acceleration of our strategy in 2012. A large majority of the increase was driven by APAC, mostly in financing services and derivatives.
FX, Rates and Credit revenues increased 4% year-on-year to 402 million, with strong performance in FX and rates on increased client volumes.
Corporate Client Solutions revenues were down 16% year-on-year, mainly in DCM, where leveraged finance revenues have decreased and the market fee pool declined 35% year-on-year. Revenues increased in advisory and risk management, and although revenues declined in ECM, this was to a lesser extent than our peer group.
Operating expenses increased 3% year-on-year, as higher variable compensation expenses more than offset lower general and administrative expenses. Our cost/income ratio was 73%, within our target range of 70-80%.
We continued to maximize resource efficiency through optimal use of the business’s allocated resources, which were roughly unchanged in the quarter. Revenue per unit of VaR increased to a record of 214 million.
SLIDE 18 – Corporate Center
Profit before tax in Corporate Center Services was negative 253 million, compared with negative 222 million in the prior quarter. Operating expenses before allocations increased mainly due to higher marketing costs, as well as higher professional fees associated with on-going changes to our legal entity structure.
Profit before tax in Corporate Center - Group Asset and Liability Management was negative 127 million compared with positive 91 million in the prior quarter. Gross income decreased to 70 million, on lower gross income from hedging activities and balance sheet risk management.
Central funding costs retained in Group ALM increased slightly to 180 million, and continued to be a drag to the Group’s earnings, at 349 million year-to date compared with nearly 800 million in 2014. We’re ahead of our debt issuance plans, particularly with regard to AT1. However, we continue to expect these costs to decrease significantly by the end of 2016.
As a result of our ongoing efforts to optimize our legal entity structure, we anticipate that some foreign currency translation gains and losses previously booked directly into equity through OCI, will be released into our P&L due to the sale or closure of branches and subsidiaries. In the
second half of 2015, we expect to record net foreign currency translation losses of around 120 million related to these disposals, although gains and losses could be recognized in different periods. Consistent with past practice, these losses will be treated as adjusting items. The release of these FCT losses to the P&L will have no impact on our equity and regulatory capital.
Profit before tax in Non-core and Legacy Portfolio was negative 132 million. Operating income of 35 million included a gain of 57 million related to the settlement of two litigation claims, which was partly offset by valuation losses. Operating expenses increased by 7 million on higher charges for provisions for litigation, regulatory and similar matters.
We made significant progress reducing the Non-core and Legacy Portfolio LRD, which decreased 14 billion to 70 billion on continued unwind and novation activity. RWA also decreased 4 billion to 32 billion on lower credit risk and market risk RWA.
Since the inception of the Non-core and Legacy Portfolio, we’ve reduced LRD by over 220 billion, and as you can see on slide 29 in the appendix, over 40% of the remaining LRD is expected to decay naturally by the end of 2018. We’ll continue to seek opportunities for active acceleration where we believe the tradeoff between cost of exit and the cost of capital and other operating costs is reasonable. However, these opportunities may be more limited in the future.
SLIDE 19 – Corporate Center cost reductions
We achieved an additional 100 million of annualized net cost reduction in the Corporate Center, bringing our total annualized Corporate Center cost reduction to 900 million, based on the June exit rate versus full-year 2013. The additional 100 million was driven by decreases in IT, operations and Corporate Real Estate and Services.
The annualized cost related to regulatory demand has increased to around one billion, of which around 400 million is of a permanent nature. Increased regulatory burdens continue to present significant headwinds to our targeted cost reductions. We’ll continue to remain focused on overcoming these costs, to achieve the net cost reduction targets we’ve set out.
SLIDE 20 – Swiss SRB Basel III capital and leverage ratios
Our fully applied CET1 ratio increased 70 basis points to 14.4% and remained above 10% post-stress, while our fully applied Swiss SRB leverage ratio increased 10 basis points to 4.7%. CET1 capital increased largely on higher retained earnings, partly offset by the impact of a stronger Swiss franc and accruals for capital returns for shareholders.
Risk-weighted assets declined by 7 billion to 210 billion, below our year-end target. This was driven by a 4 billion reduction in the supplemental operational risk RWA mutually agreed by UBS and FINMA, as well as lower market and credit risk RWA in Non-core and Legacy Portfolio. Our Swiss SRB LRD decreased by 33 billion to 944 billion, largely due to a substantial reduction in Non-core and Legacy Portfolio as well as Corporate Center – Group ALM. 139 billion of our leverage ratio denominator is from our high-quality liquid asset portfolio. Since the fourth quarter of 2012, we’ve reduced Group LRD by 262 billion, despite growing our high-quality liquid asset portfolio LRD by 9 billion.
Our fully applied BIS Basel III leverage ratio increased by 20 basis points to 3.6%.
As a result of the progress we’ve made in reducing our LRD, and with updated market share information for 2014 provided by FINMA, our progressive buffer requirement for 2019 has been reduced to 4.5% from 5.4%, bringing our total capital requirement for 2019 down to 17.5% from 18.4%, in line with our previous expectations.
In the third quarter, we intend to issue AT1 capital to further improve our Basel 3 leverage ratio numerator. In addition, we intend to issue TLAC-eligible debt out of a special purpose vehicle of our Group holding company. We’ll treat our TLAC and AT1 issuances in the same manner as we’ve treated other regulatory matters – by addressing them early and decisively, and staying ahead of minimum requirements.
SLIDE 21 – Deferred tax assets
Consistent with past practice, we expect to remeasure our deferred tax assets in the third quarter based on a reassessment of future profitability, taking into account updated business plan forecasts. As mentioned in our 2014 Annual Report, we’ll also consider a further extension of the forecast period used for US DTA recognition purposes from six to seven years.
In the event that the forecast period is extended, we estimate that the effect combined with the updated business plan forecasts, could lead to a net upward DTA revaluation of around 1.5 billion. We expect any DTA revaluation from this year’s reassessment to be recognized 75% in the third quarter, and 25% in the fourth.
The US DTAs have been recognized principally on the expected future profits of Wealth Management Americas, and we’d expect WMA to be the main driver of any future recognition of the remaining 15.8 billion of US DTA that are currently unrecognized.
SLIDE 22 – UBS – a unique and attractive investment proposition
In conclusion, our results for the quarter were strong, with good underlying performance across all of our businesses. We continued to reduce cost and improve effectiveness and efficiency. In Non-core and Legacy Portfolio, we’ve made material progress in reducing LRD. We’ve also further improved our resolvability by implementing UBS Switzerland AG.
UBS represents a truly unique and attractive investment proposition. We’re the world’s leading wealth manager, and we’re a growing business with a clear strategy, a strong capital position, and a firm commitment to deliver attractive capital returns to shareholders.
Thank you. Sergio and I will now take your questions.
This Form 6-K is hereby incorporated by reference into (1) each of the registration statements of UBS AG on Form F-3 (Registration Number 333-200212) and of UBS Group AG on Form S-8 (Registration Numbers 333-200634; 333-200635; 333-200641; and 333-200665) and Form F-4 (Registration number 333-199011), and into each prospectus outstanding under any of the foregoing registration statements, (2) any outstanding offering circular or similar document issued or authorized by UBS AG that incorporates by reference any Form 6-K’s of UBS AG that are incorporated into its registration statements filed with the SEC, and (3) the base prospectus of Corporate Asset Backed Corporation (“CABCO”) dated June 23, 2004 (Registration Number 333-111572), the Form 8-K of CABCO filed and dated June 23, 2004 (SEC File Number 001-13444), and the Prospectus Supplements relating to the CABCO Series 2004-101 Trust dated May 10, 2004 and May 17, 2004 (Registration Number 033-91744 and 033-91744-05).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 27, 2015
UBS Group AG
By: /s/ David Kelly Name: David KellyTitle: Managing Director
By: /s/ Sarah M. Starkweather Name: Sarah M. StarkweatherTitle: Executive Director
UBS AG
By: /s/ David Kelly Name: David KellyTitle: Managing Director
By: /s/ Sarah M. Starkweather Name: Sarah M. StarkweatherTitle: Executive Director